Working Papers

Job Market Paper

Networks feature prominently in venture capital markets. This paper focuses on alumni networks and exploits a new partner with new alumni networks joining a venture capital company as a plausibly exogenous change to the VC’s alumni networks. New alumni ties lead to an 8.21% increase in investments in startups with alumni founders, while induce a 22.93% increase in failure rates and a 17.53% decline in acquisition rates. Supplementary tests suggest that although venture capitalists benefit from networks through better information, preference for alumni startups offsets the benefits and induces capital misallocation.

with Adrien d'Avernas, Andrea Eisfeldt, Richard Stanton, and Nancy Wallace

The deposit business differs at large versus small banks.  We provide a parsimonious model and extensive empirical evidence supporting the idea that much of the variation in deposit-pricing  behavior between large and small banks reflects differences in ``preferences and technologies.''  Large banks offer superior liquidity services but lower deposit rates, and locate where customers value their services.  In addition to receiving a lower level of deposit rates on average, customers of large banks exhibit lower demand elasticities with respect to deposit rate spreads.  As a result, despite the fact that the locations of large-bank branches have demographics typically associated with greater financial sophistication, large-bank customers earn lower average deposit rates.  Our explanation for deposit pricing behavior challenges the idea that deposit pricing is mainly driven by pricing power derived from the large observed degree of concentration in the banking industry.

with Sizhu Lu

Startup seeking debt financing from banks (venture debt) is observed to be unexpectedly active and experiencing steady growth in recent years. This paper studies the rise of venture debt through a signaling channel. We model and document the role of venture debt as a positive signal in startup financing under asymmetric information, which increases the probability of a firm getting future venture capital (VC) funding, and in turn reduces the risk of venture debt and encourages lending to startups. However, VCs' reliance on the signals induces over-investment in startups of lower quality.

Work in Progress